Received a letter today offering $7500 per acre for purchase of mineral rights.
Wondering if there is a lot activity in this field and, if so, is this offer in the normal range at this time?
I guess you know Benbrook is in the middle of the Burnett Shale activity. Is the offer from a company that will be doing the drilling? In my opinion it is always better to lease than to sell. We leased for a lot more than $7500, but the market has dropped since then. The market will go back up at some point.
We’ve already leased rights to a drilling company that hasn’t drilled yet. Selling would direct any future royalties to the new mineral right’s owner.
I’ve more of a problem trying to determine net present value. I agree that the market will go up eventually but will it be as a result of scarcity or the dollar’s devaluation?
L D H said:
I guess you know Benbrook is in the middle of the Burnett Shale activity. Is the offer from a company that will be doing the drilling? In my opinion it is always better to lease than to sell. We leased for a lot more than $7500, but the market has dropped since then. The market will go back up at some point.
Carlos,
Usually when the companies try to buy your minerals, they like to show you based on 50 times what current production is. I don't know your acreage but I have 7 net mineral acres in Hudson Oaks, near Weatherford and that is a less producing area than the mother load in Tarant where your wells will be. You say the oil company has not drilled on your property yet. I suggest you call them and asked for well production from wells near your land so you can get an idea of how much production will come from your wells. You can look this up at the Texas Rail Road Commission site if you have the well numbers. My production from two wells in their second year of production $400 a month. So lets pretend now that your wells would bring in double that, since its in the main part of the Barnett Shale, and it could turn out to be a Reall Gusher like some of the ones in Johnson county. 800 a month X50 =$40,000. So if you sell before they drill for less than $40,000 you will lose big time. 20 years will yield $192,000 dollars, I have been getting checks on some wells that are 80 years old, and be reworked over the years. So those companies are looking at the production around you and shooting offers just after Christmas hoping to get to takers. And they do. Just so you will know it took Devon just under 6 years from first lease signing to drill.
And know this, The Big Print in the Contract Giveth, and the small print taketh away, and many a attorney has told me that they write the contract in such a way, that if you don't have it looked at by any attorney, they will take all minerals you have for that price, not just ones you think they are getting. This is serious business, and you need an attorney to look over any documents you consider signing.
Sincerely,
Chris